What Is a Tax Refund Loan and Should You Get One?
Janet Schaaf is a freelance writer, editor and proofreader who considers reader advocacy to be her calling. After taking a few roads less traveled, Janet completed a bachelor’s degree in English Literature from the University of Missouri-Kansas City, with English Department Honors. She has been correcting grammar and checking facts since she could string a sentence together. For the past three years, Janet has focused on making personal finance topics understandable and relatable. Loan terms and credit card agreements can look overwhelming, but understanding what you’re agreeing to is paramount in grasping the impact debt can have on your life.
If you have a tax refund coming but need access to cash now, you might consider a tax refund loan. A tax refund loan often comes with a 0% annual percentage rate (APR), but it’s typically only available at certain times of year and you might need to pay tax preparation fees.
Here’s what you need to know about tax refund loans, and how to compare them with other types of loans.
What is a tax refund loan?
Some financial institutions will offer you a short-term loan based on your upcoming tax refund.
This is often referred to as a Refund Advance Loan or a Refund Anticipation Loan (RAL).
You could also get a Refund Anticipation Check (RAC), which usually occurs when you indicate to your tax preparer that you’ll pay their fees out of your refund. The government then sends your refund as a check to your financial institution, which disburses the funds appropriately.
If you decide to get a tax refund loan, your tax preparer or loan agent will review your return, your income and your credit when you e-file your taxes. Based on all of this information they could loan you a portion of the money you’re anticipating to receive back from the government.
Your RAL will then be loaded onto a prepaid card or deposited into a bank account. A temporary bank account is set up for your tax refund so that when it arrives, the amount of the RAL and any interest or fees are deducted automatically. You’ll keep whatever is leftover.
Where to get a tax refund loan
Various tax preparation services offer tax refund loans. Here are a few major companies that offer this type of loan:
H&R Block
If you apply in January or February, you could get a tax refund loan from H&R Block for up to $3,500. The amount of these loans, which are funded by Pathward. N.A, depends on how much of a refund you’ll be receiving on your taxes.
This is a 0% APR loan, and you might be able to access your funds the same day you file via H&R Block’s Emerald Prepaid Mastercard or Spruce account.
| Loan amounts | $250, $500, $750, $1,250, $3,500 |
| APR & fees | 0% APR, no fees |
| Funding time | Same-day funding available |
| Eligibility requirements | Must provide a Social Security number, information from last year’s tax refund and your contact details to prequalify |
| Tax preparation fee | Starting at $89, plus additional state fees |
| Deadline | The Refund Advance loan is available from January 2 through February 29 |
Intuit TurboTax
Intuit TurboTax offers tax refund advances in the amounts of up to $4,000, based on your predicted refund. If you’re approved, you’ll get the loan immediately on a Credit Karma Money virtual debit card. But, you’ll have to open an account with Credit Karma first to access the funds.
Similar to H&R Block’s tax refund loan, TurboTax’s refund advance is only available until February 15 or until funds run out.
| Loan amounts | $250, $500, $750, $1,000, $1,500, $2,000, $2,500, $3,000, $3,500 and $4,000 |
| APR & fees | 0% APR, no fees |
| Funding time | Funds available in minutes after IRS approval |
| Eligibility requirements |
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| Tax preparation fee |
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| Deadline | February 15 or until funds run out |
Jackson Hewitt
Jackson Hewitt offers both early refund loans and no-fee refund loans. Its early refund loans max out at $1,000 and have a relatively high APR of 35.53%. If you can wait, you could access one of its regular tax refund loans, which come with 0% APR and max out at $6,500.
| Loan amounts | Early Refund Advance: $100, $300, $500 $1,000 No Fee Refund Advance: $250, 500, $750, $1,000, $1,500, $2500, $3,500, $4,500 and $6,500 |
| APR & fees | Early Refund Advance: Comes with a 35.53% APR and a finance charge of up to $73, depending on the loan amount No Fee Refund Advance: No APR, no fees |
| Funding time | The funds for either loan can be disbursed the same day with a prepaid card, but direct deposit can take up to one to five business days. |
| Eligibility requirements | Early Refund Advance: To qualify for a $1,000 loan, your expected federal refund must be at least $2,600. No Fee Refund Advance: To qualify for a $6,500 loan, your expected federal refund must be at least $6,600. |
| Tax preparation fee | Starting at $25 to file online |
| Deadline | Early Refund Advance: January 14 No Fee Refund Advance: February 11 |
Pros and cons of tax refund loans
| Pros | Cons |
|---|---|
Get access to your funds quickly. If you need money now, a tax refund loan could help you pay for immediate expenses. Stay on top of your finances. If you’re accruing interest because of unpaid bills, paying them off with a tax refund loan could save you money. Could cost nothing to access your funds now. If your tax preparer is offering an advance on your return free of charge then it could equate to an easy way to get instant cash. | The prepaid debit card could have fees. If your tax preparer loads the money onto a card, there might be fees associated with using the card that you should be aware of. Could cost money in interest or fees. Make sure you learn exactly what this loan will cost you and if the lender is charging interest on the advance. You could end up with less money than anticipated. If your tax preparer has miscalculated, or if the IRS holds any of your return due to a tax lien, you could receive less money than you expected However, you’d still be responsible for repaying the full amount of the loan. |
Should you get a tax refund loan?
There are some cases when a tax refund loan might be your best option:
- If you need money in an emergency. If you have no other way of getting money and need it immediately, a tax refund loan could be a way to avoid other forms of bad debt.
- If it won’t cost you anything. If there are no fees or interest attached to the loan, then it might make sense to access your funds now.
- If it would cost you more to wait for the money. If you’re paying high interest rates on debt now and need your tax return to get out of debt, using a loan to clear the debt quickly could save you cash.
In other cases, it could be best to wait for your actual tax return to arrive:
- If you’d otherwise prepare your own taxes. It does cost money to have an expert do your taxes, which you’ll need to do for them to loan you money on your return. If you don’t need the cash now and this is the only reason you’re paying a preparer, it might make more sense to do your taxes yourself and wait for your return.
- If you can afford to wait for the cash. If you don’t need the cash in a hurry, it could be easiest to wait for your return.
- If you have a federal tax lien or owe child support. If you expect there’s a reason the IRS might withhold some of your return, then you should probably wait instead of taking out a loan based on a return that might not fully materialize.
- If you need more cash than your expected return. If you’re looking for a larger loan a tax refund loan is probably not the right option for you and you might want to consider a personal loan instead.
Alternative options to tax refund loans
If you’re looking for ways to get money now, you don’t need to rely solely on an advance on your tax refund. Here are some other options:
Payday alternative loan (PAL): Credit unions are legally allowed to give federally regulated payday alternative loans (PALs) that could help you quickly access small dollar amounts. If you don’t need a lot of money and you’re looking for a short-term loan, a credit union could have a lower interest rate. Keep in mind that a PAL is not a payday loan, though it does have a shorter repayment than a traditional personal loan. Payday loans come with exceptionally high interest rates that can make repayment difficult.
Personal loan: If you need more money than what’s on your expected tax return, it could make sense to borrow funds using a personal loan. Compare products online to make sure you’re getting your best APR and terms.
Low-interest credit card: Depending on your credit, you could qualify for a 0% intro APR credit card. If you pay off your balance on the card before the promotional period expires, you won’t owe anything in interest.
Small personal loan lenders
If you decide that a tax refund loan isn’t right for you, consider a personal loan from one of these lenders instead.
| Lender | User ratings | Loan amount | Annual percentage rate (APR) | Loan term | |
|---|---|---|---|---|---|
 | User ratings coming soon | $250 to $50,000 | 8.99% to 18.00% | 60 months | See Offers |
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User Ratings & Reviews
Ratings and reviews are from real consumers who have used the lending partner’s services. | $600 to $50,000 | 7.99% to 17.99% | 12 to 60 months | See Offers |
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User Ratings & Reviews
Ratings and reviews are from real consumers who have used the lending partner’s services. | $1,000 to $35,000 | 8.19% to 24.74% | 6 to 60 months | See Offers |
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User Ratings & Reviews
Ratings and reviews are from real consumers who have used the lending partner’s services. | $1,000 to $40,000 | 9.57% to 35.99% | 24 to 60 months | See Offers |
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User Ratings & Reviews
Ratings and reviews are from real consumers who have used the lending partner’s services. | $1,000 to $50,000 | 8.49% to 35.99% | 24 to 84 months | See Offers |
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User Ratings & Reviews
Ratings and reviews are from real consumers who have used the lending partner’s services. | $1,000 to $50,000 | 7.80% to 35.99% | 36 and 60 months | See Offers |
